I remember when I was just starting out with my life…graduated high school and was ready to tackle the world…but how would I do that without a credit card?
Luckily I was 24 when I got my first credit card…it was a Sears Card (still have it) and I had watched enough friends go through “credit hell” to know that credit cards were bad news. I also had a wise old grandfather who liked to remind me all the time that “credit cards were the devil.” he would say. And by golly he was right.
Today is National Get Smart About Credit Day and I have decided to share a few things that I have learned along the way about credit and your credit score.
Don’t open a charge account every time a department store tells you they will give you a discount for opening one. Department store credit cards are always higher in interest. Usually averaging in around 23% or higher. Not to mention that the more credit cards you have activated…the more it hurts your credit.
Pay attention to your debt to credit ratio. This means that the amount of credit you have available should be higher than that you are using. Much higher. Your credit score with be majorly affected if you go above a 50% ratio.
Don’t close unused accounts. This goes with the statement above. If you have cards you don’t use it’s not always a good idea to close them because that also lowers your debt to credit ratio and believe it or not also takes points off your score.
When buying something via loan be aware that every inquiry on your credit hurts your credit score. I am sure you are asking, then how am I supposed to find the best deal for a loan? Staying on top of your credit score and having this information readily available with you can avoid them having to do an inquiry on your credit report. Credit Karma is a great place to keep track of your credit report and score and it’s free! It really is. If you have been with a particular bank for a long time your best bet would be to check with them first about obtaining a loan. Especially when doing a car loan.
Don’t use a credit card unless you can pay it off each month. I know that for some this is a very difficult task, so try to limit your use to only using credit cards for emergencies. Not to obtain a want, but a need, rather. Yes that new dress would be great hanging in the closet but just add up in your head how much you will actually pay for it after you have taken 6 months and lots of interest payments later to pay for it.
When getting a major credit card try to obtain one with a points perk. And make sure they don’t expire! You can build up points quickly by using the credit card for everyday purchases and making sure to pay it off before the grace period. Just make sure you keep track of what you are spending so you are not surprised when you go to pay it.
Zero interest or same as cash is awesome. If you can purchase something with one of your cards and get so many months same as cash…go for it! Just make sure that you pay the amount before the end, or the credit card will charge you all the back interest for not paying within the said time limit. Best way to do this is to take the total of what you are going to owe and divide it by how many months you have to pay it and then pay that amount every month. I am all for borrowing someone else’s money for free and not having to dig into my own savings for a big purchase.
Try and get lower interest rates. When your credit score is in good standing and you have been paying your bills on time call your credit card companies and see if they would be willing to offer you a lower rate or a special offer on a balance transfer. Only do balance transfers if they are really going to save you a ton of money. The hidden fees in balance transfers sometimes out weigh the money you think you are saving.
Always have one credit card in use. To keep your credit score up you must always be using your credit. Therefore even if you hate using credit cards, if you love having a good score then you will want to always have one card you are using at least once a month. Even if you just make a small purchase with it and pay it off before interest.
Please note that I am not a financial advisor or banker, I am just sharing with you what I have learned through my history with credit.
Do you have anything to add to this with your personal history? Please let me know in the comments.
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